DIXON — The Dixon Public Schools board of education will consider an approach to debt restructuring that meets the administration’s long-range plan to regularly update curriculum and technology, provide more robust social-emotional services and make any large-scale improvements to facilities.
Anne Noble, managing director of a public financing team based at the St. Louis headquarters of Stifel, made the financial presentation during the Jan. 18 meeting held at the district’s administrative offices on Franklin Park Road.
The far-reaching part of the fiscal plan goes through 2045, when the tax increment financing district expires and those properties enter the tax rolls.
“As these bonds go away, your borrowing capacity increases,” Noble said.
Noble described a financing model similar to one used at Urbana District 116, which borrows $3 million every three years to regularly upgrade its technology. In this way, the district pays down the loan without incurring long-term interest payments that extend past when the equipment becomes obsolete.
Likewise, the Dixon plan depends on short-term borrowing designed to wean the district of its reliance on the heftier long-term debt-service sales tax bonds and the yo-yo effect they have, such as causing property tax rates to fluctuate.
“I’m not trying to say a falling tax rate is a bad thing; it is not,” Noble said. “It just eats away at your ability to do this.”
As a point of emphasis, Noble said this strategy isn’t about the district’s legal borrowing capacity, but rather to give it rolling access to money beyond its regular operating fund.
Presently, the district has four debt service bonds, issued in 2014, 2016, 2017 and 2019, that amount to almost $2.4 million.
While the district has, according to its fiscal year 2023 budget, $3 million in working cash (largely gained through internet sales receipts), the law prohibits paying off longer-term bonds far ahead of schedule.
Moreover, the equalized assessed value of taxpayer property in Lee and Ogle counties jumped 8.68% in 2022 – the biggest single-year change in the previous 10 years – causing the required tax rate to dip from 60 cents to 53 cents. As time passes, that required tax rate will drop lower, to about 45.7 cents by fiscal year 2038.
Board member John Wadsworth asked for a clarification: “The goal is to keep the tax rate at 60 cents, increase resources for the district, but keep taxes the same?”
In saying yes to his question, Noble said she is just giving the district an option. But she added that “down the road” she won’t be able to show the same options without factoring in a tax rate increase.
Marc Campbell, the district’s business manager, said: “If we do nothing … then we start asking questions like: How do we fund … fill in the blank?”
He then listed priorities such as social-emotional programs, special education and a new English curriculum – whose costs, in recent years, were covered by grants from COVID-19 federal recovery programs. Those grants run their course in a couple of years, though, and are not likely to be renewed.
“We need the ability to understand how we’re going to fund these big projects,” Campbell said. “That’s what a plan like this can do.”
Wadsworth asked if such financing was normal. Noble said about 10% districts do it. Urbana was adverse to paying interest, so with three-year bonds being cheaper than 20-year bonds, it was the more attractive option to it, she said.
The last point made by Noble was of timing. The deadline to enact the first stage of this plan during this fiscal year is fast approaching. The district has until Feb. 28 to approve the sale of the 2023 refunding bonds, a bidding process that began Friday and involves local banks.
The board will vote on whether to enact this plan at its Feb. 15 meeting. If it goes forward, the first bond funds could be placed in escrow on March 8.
Campbell acknowledged “this is a lot to take in” and, in the meantime, he invited individual board members to meet with him for greater details on the process. He also said he would present a fact sheet for members to review.
The long-range plan
Here is an outline of the long-range plan provided by Anne Noble, managing director at Stifel, based on priorities listed by the Dixon Public Schools administration.
2023: Refund $635,000 of the principal scheduled to be repaid from 2023-2030 from the outstanding 2017 and 2019 bonds. The proceeds will be placed in an escrow account with a trustee and will be invested in U.S. Treasury securities. The initial deposit plus the interest earnings in the escrow will pay the refunded interest payments and principal on the call dates of Jan. 30, 2025 and Jan. 30, 2026.
2024-2025: The repayment of the 2023 bonds will be moved from their original schedule to this time frame to fill in the declining bond tax rate caused by the growth in equalized assessed value. This is done to manage the cash flow of bond payments to maintain a bond tax rate of 60 cents.
2025: The district can borrow up to $4 million to pay for the 10-year health, life and safety survey, new technology and a curriculum upgrade.
2030: The district can borrow up to $4 million for new technology and curriculum.
2035: The district can borrow up to $4 million and pay off the 2036 and 2038 revenue bonds.
2040: The district can borrow up to $4 million for technology and curriculum upgrades.
2045: The district can borrow up to $10 million.